Question

At the beginning of the year, Alaska Freight Airlines purchased a used airplane for $ 43,000,000. Alaska Freight Airlines expects the plane to remain useful for five years (4,000,000 miles) and to have a residual value of $ 7,000,000. The company expects the plane to be flown 1,400,000 miles during the first year.

Requirements 1. Compute Alaska Freight Airlines’ first-year depreciation expense on the plane using the following methods: a. Straight- line b. Units-of-production c. Double-declining-balance 2. Show the airplane’s book value at the end of the first year for all three methods.